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Innovation, employment growth, and foreign ownership of firms

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  • Dachs, Bernhard
  • Peters, Bettina

Abstract

This paper examines how foreign-owned and domestically owned firms transform innovation into employment growth. The empirical analysis, based on the model of Harrison et al. (2008) and CIS data for 16 countries, reveals important differences between the two groups: Due to general productivity increases and process innovation, foreign-owned firms experience higher job losses than domestically owned firms. At the same time, employment-creating effects of product innovation are larger for foreign-owned firms. Together with employment-stimulating effects stemming from existing products, they overcompensate the negative displacement effects resulting in net employment growth in foreign-owned firms. However, net employment growth turns out to be smaller in foreign-owned firms than in domestically owned firms.

Suggested Citation

  • Dachs, Bernhard & Peters, Bettina, 2014. "Innovation, employment growth, and foreign ownership of firms," Research Policy, Elsevier, vol. 43(1), pages 214-232.
    • Handle: RePEc:eee:respol:v:43:y:2014:i:1:p:214-232
    DOI: 10.1016/j.respol.2013.08.001
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    More about this item

    Keywords

    Employment; Innovation; Foreign ownership; Community Innovation Survey; Host country effects;

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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